ATP 790P “Kogan South”

Annual Report to 31 October 2007

Brad Pinder Senior Geologist

P 07 3105 3400 ARROW ENERGY LTD LEVEL 13, 10 EAGLE STREET GPO BOX 5262 BRISBANE QLD 4001 info@arrowenergy.com.auF 07 3105 3401 ABN 73 078 521 936 BRISBANE QLD 4000 ASX CODE AOE arrowenergy.com.au

1.0 SUMMARY.......................................................................................................12.1 Location & infrastructure ................................................................................22.2 Tenure history ................................................................................................22.3 Exploration Concept ......................................................................................2

3.0 REGIONAL GEOLOGY....................................................................................52.1 Paleozoic basement ......................................................................................52.2 Bowen Basin (Permian-Triassic) ...................................................................72.3 Jurassic-Cretaceous Basins ..........................................................................8

Great Artesian Basin............................................................................................8Surat Basin...........................................................................................................8

3.0 PERMIT GEOLOGY.......................................................................................113.1 Walloon Coal Measures ..............................................................................113.2 Precipice Sandstone ....................................................................................11

4.0 CONVENTIONAL EXPLORATION & PROSPECTIVITY..............................134.1 Previous company exploration (conventional hydrocarbons) ......................134.2 Trap .............................................................................................................154.3 Charge .........................................................................................................154.4 Reservoir .....................................................................................................154.5 Seal .............................................................................................................164.6 Discussion ...................................................................................................16

6.0 ARROW EXPLORATION...............................................................................166.1 CSG Exploration. .........................................................................................166.2 Proposed programme ..................................................................................17

Figure 1: Infrastructure in and around ATP 644P........................................................3Figure 2: Graticuar Blocks...........................................................................................4Figure 3: Regional structural elements around ATP 790P...........................................6Figure 4: Location of wells within ATP 790P..............................................................17

1.0 SUMMARY

ATP 790P is located approximately 17km west of Dalby in the Surat Basin. The ATP area consisting of 1 full block and 4 sub-blocks is considered highly prospective for Coal Seam Gas (CSG) from the Walloon Coal Measures.

PL 230 has previously been excised from the area of ATP 790P, and a PL application (PLA252) has been submitted for an additional 25 sub-blocks. During the period, three wells were drilled on the ATP showing very good results.

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2.0 INTRODUCTION

2.1 Location & infrastructure

ATP 790P is located approximately 17km west of Dalby. The northern part of the Permit included a portion of the high pressure gas pipeline connecting Roma to Brisbane, and the area is also serviced by a main rail link and the Warrego Highway which is the principal inland route to western and northern Queensland (Figure 1).

Important areas of population occur at Dalby and Chinchilla, with industrial development taking place at Dalby. Significant coal deposits occur at Kogan Creek, Glen Wilga, and Wilkie Creek, and a 750 MW coal fired power station is planned at Kogan Creek, to become operational in 2007.

2.2 Tenure history

ATP 790P originally consisted of three blocks, and was granted to Arrow Energy N.L. (100%) on 1 November 2004, and is due to expire on 31 of October 2008. Upon grant of PL230, this area was excised from ATP 790P. The remaining area consists of 29 sub-blocks (Figure 2).

2.3 Exploration Concept

ATP 790P was applied for to assess to coal seam gas (CSG) potential of the mid Jurassic Walloon Coal Measures. Within the permit it is probable that coals attain sufficient thickness and gas content to allow commercial production of methane.

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Figure 1: Infrastructure in and around ATP 644P

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Figure 2: Graticuar Blocks

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3.0 REGIONAL GEOLOGY

2.1 Paleozoic basement

South East Queensland consists of several fault bounded basement blocks and exotic terranes of late Paleozoic age, intruded by Permian and Triassic granitoid plutons and covered by Triassic to Jurassic and Tertiary intra-cratonic sedimentary basins. These rocks form part of the New England and Yarrol Orogens (Figure 3).

The present day New England Orogen extends for 1500 km from Newcastle to Bowen, and is bounded to the west by the Hunter-Mooki-Goondiwindi Fault System. This fault system is interrupted by the north east striking Undulla Fault, and re-commences northwards as the Burunga Fault. Groundwater geochemistry within PLA 185 indicates the presence of a deep seated fault, and it is likely that the Undulla Fault continues as far as the Condamine River (which may itself be fault controlled).

From the Cambrian Eastern Australia was an active plate margin, although the present tectonic pattern dates principally from the Devonian. During early Devonian to Carboniferous times the region was dominated by a westward dipping subduction zone with a forearc basin (Tamworth and Yarrol Belts) bounded to the west by a volcanic arc (Connor-Auburn Arch) and to the east by an accretionary wedge (Coffs Harbour, Beenleigh and South D’Aguilar Blocks).

These accretionary wedges are sub-parallel to the present coast line and aligned approximately north-south. The Beenleigh, D’Aguilar and Coffs Harbour blocks consist of deformed and metamorphosed turbidite sequences and minor deep sea floor basalt and chert of late Paleozoic age.

Cessation of subduction at the end of the Carboniferous was followed by orogenic deformation and accretion of exotic terranes during the Permian and Triassic. From the Permian to mid Triassic Eastern Australia was part of a convergent plate margin system related to the coalescence of the constituent parts of Gondwana.

The Gympie block accreted to the Yarrol Orogen in mid to late Triassic times, accompanied by initiation of the Ipswich Basin. The process of orogeny and accretion was accompanied by significant strike slip displacement, possibly of the order of hundred of kilometers in the Permian-Carboniferous, and tens of kilometers in the Triassic.

Subduction had ceased in the Late Carboniferous and re-commenced in the east from the Permian to Triassic, with Mesozoic basin development forming in a back arc setting.Mesozoic basins are en-echelon in arrangement, and formed as depressions genetically related to the twisting of the New England Orogen into two coupled oroclines (Texas Orocline and Coffs Harbour Orocline).

To the east of the present day Moonie Fault Paleozoic basement is represented by the late Carboniferous Camboon Andesite and Kuttung Volcanics, known collectively as the Kuttung Formation. This is in turn underlain by the metamorphosed Devonian Timbury Hills Formation. To the east are found the Neranleigh-Fernvale Beds. These strata have been assumed to be the same age in Arrow stratigraphy.

Figure 3: Regional structural elements around ATP 790P

2.2 Bowen Basin (Permian-Triassic)

Tectonically, Eastern Australia evolved orogenically from a subduction to cratonic environment by the late Triassic. The earliest rocks of the Bowen-Gunnedah-Sydney Basin (referred to here as the Bowen Basin) are early Permian volcaniclastic marine sediments deposited in an extensional phase in the Denison Trough, Taroom Trough, Gympie Basin and Esk Trough. Subsidence was rapid in fault bounded grabens and half grabens, although sediments may have deposited under relatively shallow conditions.

Early Permian extension was terminated by compression of a late Permian orogeny, followed by intrusion during Triassic extension and a shift to non marine (alluvial and lacustrine) conditions.

Passive thermal subsidence commenced in the mid Permian marked by a widespread marine transgression. Sediment supply from the now inactive volcanic eastern margin decreased, and sedimentation was dominantly clastic with some carbonates.

In the late Permian a belt of fold-thrust mountains developed on the eastern margin. This mountain belt moved progressively westwards, incorporating the older foreland basin.Sedimentation changed diachronously from uniform sheets of marine sediment to syntectonic detritus marked by slumps, debris and turbidity flow deposits representative of an unstable shelf environment.

From the late Permian to mid Triassic the Bowen Basin subsided as a foreland basin (Hunter-Bowen event), while intra-cratonic basins to the west (such as the Galilee Basin) also subsided. On the east margin a resurgent volcanic arc developed, with volcanic sediment deposited to the west and south in alluvial fans. Volcanogenic clastic depositsformed the late Permian Baralaba Coal Measures within the Taroom Trough, age equivalents of the Rangal Coal Measures and Bandanna Formation to the north.

The main locus of deposition was the axial north-south oriented Taroom Trough, and the Denison Trough to the north of the ramp-like Comet Ridge. The basin was asymmetric, with greater sediment thickness on the mountainous eastern overthrust margin within the Taroom Trough, thinning markedly to the west.

The eastern volcanic arc supplied the bulk of sediment to the Bowen Basin, although periodic uplift of cratonic rocks to the west provided influxes of quartzose sediments. Alluvial and lacustrine deposits of the Rewan, Clematis and Moolayember Formations deposited in the early to mid Triassic over a very wide area, and the Rewan and possibly Moolayember sequences can be traced through the Cecil Plains Depression and as far east as the Esk Trough. Alluvial fan material within the Rewan Formation and quartzose sand sheets of the Clematis Group derived from uplift to the west. Late Triassic sediments similar in age to the Ipswich Coal Measures have also been noted overlying Red Beds in the Cecil Plains Depression.

Sediment flow was along a meridonial southward flowing drainage system which at times was swamped by a lake to form sealing units such as the Snake Creek Mudstone. Sediment flow was likely affected by eustatic changes, and at times supply outstripped the capacity of the basin and sediment flowed into the adjacent Galilee and Cooper Basins.

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Towards the end of the Hunter-Bowen event in the mid to late Triassic, deformation was accompanied by westward thrusting and formation of high angle reverse faults by reactivation of earlier extensional faults. The resulting uplift brought about an end to deposition, although a late Triassic extension formed a number of small rift and half graben structures such as the Ipswich and Tarong Basins. Many of these basins contain significant coal seams interbedded with dominantly volcaniclastic rocks. They formed within mountainous terrain and often feature coarse alluvial and colluvial sediments.

2.3 Jurassic-Cretaceous Basins

Great Artesian Basin

A very large intra-cratonic basin complex known as the Great Artesian Basin developed over most of Eastern Australia from the latest Triassic/earliest Jurassic. The Basin formed by a process of passive thermal relaxation over a very large area, terminating with the opening of the Tasman/Coral Sea in the late Cretaceous.

The Great Artesian Basin comprises within Queensland the Surat and Eromanga Basins, and is syn-depositional with adjacent basins including the Mulgildie, Nambour, and Clarence-Moreton Basins. The divisions between basins are based in some cases on underlying structural features, such as the Nebine Ridge separating the Surat Basin from the Eromanga Basin to the west, and the Kumbarilla Ridge which has in recent years been saidto separate the Clarence-Moreton and Surat Basins. Basins such as the Nambour Basin and Mulgildie Basin are erosional remnants of a formerly continuous basin.

The entire basin complex represents a giant river and lake system that may at one time have drained to the east through the northern part of the Clarence-Moreton Basin, via a choke point termed the ‘Toowoomba Strait’. The Strait was a broad synclinal valley which breached the barrier of the elevated Texas Block to the south and the Yarraman Block to the north, and was filled by Tertiary basalts to form a modern reversed topography.

During the mid Jurassic (Yago 1996) the paleo river system drained westwards into a lacustrine depocenter situated towards the Eromanga Basin. According to Yago, rather than a single large channel extending for several hundred kilometers, a vast floodplain was covered with many smaller channels up to 400m wide.

A series of six fining upward cycles related to eustatic sea level change can be identified across the GAB (Exon). Units form a thick layer cake stratigraphy that is only lightly deformed and can be traced over great distances across several basins. The earlier sequences are alluvial and lacustrine, although with the progressive inundation of Gondwana in the Cretaceous the rocks become marine in character.

Surat Basin

ATP 676P is situated within the Surat Basin, a large intracratonic sag structure which extends over 43,000 km2 through southern Queensland into NSW. It forms part of the Great Artesian Basin complex and unconformably overlies the Bowen Basin. The Surat Basin is flanked by the Nebine Ridge to the west and Toowoomba Strait to the east (Arrow/ACBM does not accept the Kumbarilla Ridge as a valid lithostratigraphic boundary), and is stripped

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to the north where the Bowen Basin is exposed at surface. An axial syncline, the Mimosa Syncline contains the thickest sediments and appears to be at least in part syn-depositional. This syncline is superimposed on the Taroom Trough, probably attributable to a deep seated crustal feature.

The earliest sediments of the Surat Basin may be a late Triassic lacustrine phase equivalent to the Raceview Formation of the Clarence Moreton Basin (but possibly also the Ipswich Coal Measures). These sediments are significantly more deformed than the overlying Jurassic rocks, however they post-date recognised Bowen Basin sequences. It has been suggested that this unit could represent a separate eustatic cycle.

As occurred during deposition of the Bowen Basin, periodic uplift of cratonic rocks to the west supplied quartzose sand sheets which formed reservoir rock units such as the Precipice, Hutton, and Boxvale Sandstones. However, the dominant sediment supply was from volcanic highlands to the east.

Cycle 1

The earliest accepted Surat Basin unit is the Precipice Sandstone, which dates from the latest Triassic/early Jurassic, and forms an extensive thick braided sand sheet. This is overlain by meander and swamp deposits of the Evergreen Formation, which together with the Precipice forms a single fining upwards eustatic cycle (Cycle 1). The Evergreen Shale often contains a basal sand unit and an intermediate sand member (Boxvale Sandstone) as well as an oolite horizon that can be correlated with a similar horizon in the age equivalent Marburg Formation in the adjacent Clarence Moreton Basin.

Cycle 2

Overlying Cycle 1 is the Hutton Sandstone which forms the basal section of cycle 2. The fining upwards meander/back swamp phase of Cycle 2 is represented by the mid-Jurassic Walloon Coal Measures, which may be subdivided into an upper (Juandah) and lower (Taroom) coal sequence, separated by the erosive Tangalooma Sandstone.

The Taroom sequence contains often very thick seams up to 20m aggregate thickness, which have been further divided into 3 seams by some workers.

The Juandah sequence is divided up into the Argyle, Iona, Wambo, Macalister, and Kogan seams. Individual coal seams cannot be correlated with certainty for any distance, but seam packages can be traced over several tens or even hundreds of kilometers. Each seam represents a fining upwards cycle with a basal sand unit, and may incorporate smaller sub- cycles. This repetition of similar units can make correlation extremely difficult where a recognisable feature such as the Hutton or Tangalooma Sandstone is not logged within a bore.

The overall thickness of the Walloons within the permit is remarkably consistent, averaging 420-440 m thick, although individual seam packages can vary in thickness. To the south of Kogan the overlying Cretaceous Springbok Sandstone becomes erosive, progressively removing the Juandah seams.

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The Walloon coals were laid down in a highly seasonal polar climate, and are derived from higher plant material which deposited in back swamp environments in what appears to have been a giant meander system analogous to the modern River Ob in Siberia. The perhydrous nature of the coals and their structure and permeability has made them particularly suitable for gas formation and retention.

Cycle 3

The late Jurassic erosive Springbok Sandstone progressively removed the underlying Walloon sequence to the south. This forms the basal part of Cycle 3 and is overlain by labile sediments and minor coals of the Westbourne Formation.

Cycle 4-6

Cycle 4 comprises the late Jurassic to early Cretaceous Gubberamunda Sandstone, which formed in a braided to meander environment and is overlain by the fossil wood bearing Orallo Formation. The Orallo Formation contains thin high ash coals. Cycle 5 is early Cretaceous in age and consists of the Mooga Sandstone and Bungil Formation. The upper parts of the cycle reflect marine transgression from the east. Cycle 6 is made up of the Wallumbilla Formation and reflects the regression of the Cretaceous sea with a sequence progressing from neritic to estaurine and fluvial.

Cycle 6 is the last sequence to be preserved and dates from the early Cretaceous. Compression with uplift and tilting of the Surat Basin to the south followed, with the opening of the Tasman/Coral Sea commencing some 10 Ma later.

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3.0 PERMIT GEOLOGY

3.1 Walloon Coal Measures

Jurassic rocks within the permit are oriented northwest and dip to the southeast at a shallow angle (<5º), the entire basin having been tilted upwards to the north and the northern extensions eroded off at the end of the Cretaceous.

The Surat Basin sequence is superimposed on the Permian-Triassic Bowen Basin sequence, although within the permit area the older sediments are absent and the Jurassic sits directly on Paleozoic basement.

The Surat Basin rocks form a layer cake stratigraphy that is progressively more complete from the lowermost Jurassic zero edge running along the Yarraman Block through successively younger formations until a Cretaceous section is preserved southeast of the permit. Within ATP 790P it is the mid Jurassic section outcropping at surface that is of interest in CSG exploration.

The outcrop edge of the Walloon Coal Measures bisects the permit in a northwest-southeast direction. To the east are the Hutton Sandstone and Evergreen Shale units, which following an old convention are lumped together as the Marburg sub-Group on published 1:250,000 scale mapping from a point northeast of Chinchilla and southwards.

The Walloons tend to be recessive and consequently are covered in alluvium and colluvium, including weathered Tertiary cappings. Outcrop is rare. This belt of flat lying Cainozoic cover extends to the east of the permit, and provides a somewhat imprecise method of delineating the Walloons unit.

In the southwestern half of the authority, bodies of more resistant upper Jurassic to lower Cretaceous Kumbarilla Beds outcrop. A generally complete Walloon section is preserved beneath the erosive Springbok Sandstone which is the basal unit of the undifferentiated Kumbarilla Beds, although to the south of the permit there is progressive removal of the upper Juandah sediments by the Springbok Sandstone.

3.2 Precipice Sandstone

The lowermost unit (excepting the problematic Raceview Formation) of the Surat Basin is the Precipice Sandstone. Surat Basin rocks onlap Paleozoic basement, which seems to have taken the form of flat topped hills with steep sides. This is evident in several wells where a full porous and permeable Precipice Sand has been encountered, only to be absent in wells drilled a short distance away.

The Kumbarilla Ridge is interpreted to be made up of a series of northeast trending ridges, which are bald of Precipice Sand at the highest points. The structure formed an isolated series of flat topped hills probably not exceeding 100m in height, and around which the Precipice Sand sheets flowed to the north and south.

A notable change in the electrical log signature of the Precipice unit is evident in wells as the Undulla Nose (described by some past explorers as a mesa) is approached from the southeast, with a far thinner Precipice Sand containing numerous clay or shale layers. This

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may have deposited in gullies on the flanks of the mesa, and may not in fact be continuous over the flat top.

The porous and permeable Precipice Sandstone is known to be present in Kogan-1 and absent in Jandowae South-1 to the north. The unit can be traced in outcrop against Paleozoic basement of the Yarraman Block and Triassic rocks of the Tarong Beds south of Yarraman, where the Precipice Sand can be seen to pinch out and ‘Marburg Formation’ sits on basement. The contact is obscured beneath the basalt capping of the Bunya Mountains, however ‘Marburg’ rocks sit directly on basement where the contact re-emerges to the north near Kumbia.

To the west the probable pinchout is between Xyloleum-1 and Xylane-1 wells. In the permit area Jandowae South-1 contains an apparently near complete Evergreen section, which suggests the pinchout edge cannot be too far to the south.

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4.0 CONVENTIONAL EXPLORATION & PROSPECTIVITY

4.1 Previous company exploration (conventional hydrocarbons)

No petroleum wells have been drilled within the permit. Five petroleum wells have been drilled within 10-20 km of the boundary.

Bore Year Operator Result

Kogan-1 1962 Philips Petroleum

This was the first modern petroleum well, drilled to 1047m and terminating in basalt (Kuttung Fm). It was collared on seismic which delineated a culmination on a south plunging anticline (Kogan Nose). Seismic had also indicated possible source beds pinching out against the flanks of the high. Six cores and 3 DST’s were run, and the well was electrically logged.

A 15m porous Precipice (58-0) sand on Triassic shale (possible Raceview equivalent) was water bearing, and the trap described as water flushed. There were problems with depth control on the well but the 678m water rise suggests the correct formation was tested. The DST does not look like a valid test and the card is noted ‘questionable’.

High gas readings were reported in the Walloon CM.

Kogan South- 1

1962 Philips- Sunray

This well tested fault independent closure on the Kogan Nose. A test of the top of the Hutton Sandstone obtained a mud and water rise. The base of the Evergreen and top 1m of the Precipice Sandstone also produced a water rise, despite the bottom packer set at the very top of porosity. There were said to be nohydrocarbon indications.

Yarrala-1 1965 Philips- Sunray

This well was sited to test a culmination on a south plunging anticlinal nose. It drilled to 900m, encountering a Walloon, Hutton, Evergreen, and Precipice section on a possible Raceview (or Moolayember) shale. Basement was Camboon Volcanics (Kuttung Fm).

Five cores, 6 DST’s and 3 wireline formation tests were run and the well was electrically logged. A test of the Moonie (58-0) sand

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recovered a slightly gassy water rise. Coal gas was noted through the Walloon section.

Only the lower part of the Moonie ‘58-0’ equivalent sand was tested. A core was taken from this section, and a single sidewall collected from a basal shale beneath the sand unit but neither contained hydrocarbons.

A thin gas sand may be present between 2792’- 2806’ (4.8m) in Aberdare/Raceview equivalent formation. The gamma and sonic logs suggest a clean sand with maximum porosity at 2800’. A DST over this interval gave a gassy water rise but no flow to surface. The DST curve is illegible so formation damage cannot be determined from the fiche. The base of the sand was cored from 2800’-2848’ and described as a very coarse sand grading into shale.

Tipton-1 1965 Philips- Sunray

This well was drilled to test reservoir Evergreen and Precipice sands in a north trending anticlinal fold (the Cecil Plains Anticline), encountering significant gas associated with Walloon coals, and water saturated sands.

Log interpretation shows a number of sandy zones within the Hutton and Evergreen are water saturated, although there are gas kicks up to 1%. A gas kick at ~2900’ is associated with tight formation, with no porosity developed in the microlog.

The porous and permeable Moonie sand was encountered at 3360-3625’ (1024-1105m). A DST was carried out over the interval 3307- 3352’, and despite testing an apparently tight shale immediately overlying the ‘58-0’ sand still obtained a 600’ water rise. The Rw obtained from this test was used to calculate that the ‘58- 0’ sand is water saturated. However the SP log shows Rw 1.1 in the ‘58-0’ sand giving water saturation of 75%. The water return was slightly gassy, analysed at 75.4% methane and 0.5% ethane.

This well seems on the basis of recent seismic not to have been drilled within closure. For a sealing rock to have produced a water rise

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under DST indicates water has entered the tool from the permeable unit 8’ below. Thus the Precipice here is likely to be water bearing.

Toora-1 1972 Amalgama ted/Private

This well sought a Precipice target but the sand was absent from a bald high. A porous and permeable sand reservoir was noted in the Walloon Coal Measures, at about the Tangalooma Sandstone level.

4.2 Trap

None of the previous petroleum wells drilled near the permit provides indications of significant hydrocarbons or bypassed pay. The concept of Target Oil in exploration to the north of drilling pinchout edge embayments along the flanks of south plunging anticlines was sound, as it appears that only traps with a stratigraphic component have survived flushing in this part of the Surat Basin. Most drilling has targeted purely structural plays which turn out to be bald highs or are true culminations which have nevertheless been water washed.There are no traps defined within ATP 790.

4.3 Charge

Significant amounts of oil have migrated updip from the Permian source rock kitchen to the west of the Moonie-Burunga Fault, and at one time the Precipice must have hosted large amounts of oil. The unroofing of the Precipice at its northern outcrop edge and the basinward entry of groundwater may have occurred after the main phase of oil migration. Thus residual pockets remain where a stratigraphic boundary exists, as appears to be the case at Moonie.

4.4 Reservoir

The Moonie equivalent Precipice Sand (called the ‘58-0’ Sand because it was encountered at 5800’ in UOD Moonie-1) forms an excellent reservoir up to 100m thick. This is a continuous clean sand sheet derived from granitic terrain to the west and extending over a large area, being exposed as cliffs where tilted and eroded to the north near Cracow and Monto. It extends through the Cecil Plains Depression and into the Clarence Moreton Basin where it is tighter and known in popular usage as the Helidon Sandstone.

This sand sheet pinches out against the rising paleo-terrain to the north, although it has been described in wells to the north such as Speculation-1. This appears to be an error as log character is quite different. The reservoir sands in northern wells are more likely to represent a porous and permeable Basal Evergreen Sand, or what was known as the Upper Precipice Unit.

The Precipice Sand flowed around low paleo-hills such as the Kumbarilla Ridge, with the result that many highs delineated in seismic in the Surat Basin turned out to be bald when

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drilled. The Evergreen Shale overlapped these older structures, at least some of which were later reactivated, with the result that permeable Evergreen units such as the Boxvale Sandstone may form prospective drapes.

Only Cretaceous to Miocene structures have much possibility of carrying a crestal Precipice Sand. These dominantly north-south oriented folds are imposed on an older northeast to northwest fabric, and include the Moonie High and Cecil Plains Anticline.

A difficulty is that conventional seismic is of little use in predicting the presence of the Precipice Sand, and even 3D seismic may be unable to delineate it. The other problem is that the presence of an apical Precipice Sand on a true culmination does not guarantee hydrocarbons as noted above because of the very great degree of water flushing in the Great Artesian Basin. This was the experience in Giligulgul North-1. Preservation of hydrocarbons requires that a barrier such as a fault or permeability change has existed to protect the resource from flushing.

Basal Evergreen sands, the mid-Evergreen Boxvale Sandstone, and the Hutton Sandstone all have reservoir properties, and represent secondary targets in any well.

4.5 Seal

The Precipice Sand is sealed by the Evergreen Shale; the Boxvale Sandstone has an intraformational seal; the Hutton Sandstone is sealed by the Walloon Coal Measures. Miocene aged fault breaching can occur, with the possibility of re-migrated oil preserved in stratigraphically higher reservoirs such as the Boxvale Sand.

4.6 Discussion

There are no identifiable traps within ATP 790 and the prospects of any conventional petroleum prospectivity appear to be remote.

6.0 ARROW EXPLORATION

6.1 CSG Exploration

Arrow has previously drilled 13 wells in the area of ATP 790P that was subsequently excised into PL 230. since then a further 21 wells have been drilled in PL 230.

During the permit year, three wells were drilled in the remainder of ATP 790P, these were: Stratheden-1, -2, & -3 (Figure 4). Full reports of these wells can be found in the appropriate well completion reports, however summary logs are attached as an appendix. Gas contents in Stratheden-1 averaged 2.78m3/t DAF over the whole Walloon section. Very thick coals were intersected in all three wells, up to 47.5m based on wireline logs.

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6.2 Proposed programme

The wells drilled to date show very high potential for development, and thus full development planning us underway for the area of ATP 790P not already covered by PL 230. to facilitate this development, a PL has been applied for (PLA 252) over the Stratheden area.

Figure 4: Location of wells within ATP 790P

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7.0 REFERENCES

CAMERON, J. B., 1970. The Rosewood-Walloon Coalfield. Geological Survey of Queensland, Publication, 344.

Cranfield, L. C. and Schwarzbock, H., 1972. Nomenclature of some Mesozoic rocks in the Brisbane and Ipswich areas, Queensland. Queensland Government Mining Journal, 73: 414-416

Cranfield, L.C. and Schwarzbock, H., 1976. Ipswich Basin. In: R.B. Leslie, H.J. Evans andC.L. Knight (Eds), economic geology of Australia and Papua New Guinea. 3. Petroleum. Monograph Series. The Australasian Institute of Mining and Metallurgy, Parkville, Victoria, pp. 452-454.

Day, R. W., Cranfield, L. C. and Schwarzbock, H., 1974. Stratigraphy and structural settings of Mesozoic basins in southeastern Queensland and northeastern New South Wales. In: A. K. Denmead, G. W. Tweedale and A. F. Wilson (Eds), A Symposium.Geological society of Australia, Queensland Division, Brisbane, pp. 319-362.

DAY, R.W., WHITAKER, W.G., MURRAY, C.G., WILSON, I.H., & GRIMES, K.G., 1983.Queensland Geology. Geological Survey of Queensland Publication, 383.

FIELDING, C. R., 1993. The Middle Jurassic Walloon Coal Measures in the type area, the Rosewood-Walloon coal field, southeast Queensland. Australian Coal Geology, 9: 4- 16.

FLINT, J. C. E., LANCASTER, C. G., GOULD, R. E. and HENSEL, H. D., 1976. Some newstratigraphic data from the southern Clarence-Moreton Basin. Queensland Government Mining Journal, 77(899): 397-401.

GOSCOMBE, P. W. and COXHEAD, B. A., 1995. Clarence-Moreton, Surat, Eromanga, Nambour, and Mulgildie Basins. In: C.R. Ward, H.J. Harrington, C.W. Mallett andJ.W. Beeston (Editors), Geology of Australian coal basins. Geological Society of Australia Coal Geology Group, pp. 489-511.

GOULD, R. E., 1968. The Walloon Coal Measures: a compilation. Queensland Government Mining Journal, 69: 509-515.

HILL, D. and TWEEDALE, G. W., 1955. Geological map of the Moreton district with parts of the Darling Downs, Burnett and Wide Bay districts. Department of Mines, Queensland, Brisbane.

KORSCH, G. D., O'BRIEN, P. E., SEXTON, M. J., WAKE-DYSTER, K. D. and WELLS, A. T.,1989. Development of Mesozoic transtensional basins in easternmost Australia. Australian Journal of Earth Sciences, 36: 13-28.

MARTIN, A. R. and SAXBY, J. D., 1982. Geology, source rocks and hydrocarbon generation in the Clarence-Moreton Basin. In: Jamieson (Editor), Technical papers, 1982 APEA conference. The APEA Journal. Australian Petroleum Exploration Association, Sydney, N.S.W., Australia, pp. 5-16.

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MCELROY, C. T., 1962. The geology of the Clarence-Moreton basin, Memoirs of the geological survey of New South Wales, No. 9. Memoirs of the geological survey of New South Wales, 9. Geological survey of New South Wales, Sydney.

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APPENDIX 1

PRELIMINARY COMPOSITE LOGS